Germany's economy rebounds faster with 1.2% growth forecast

The German Economic Research Institute (DIW) has raised its forecast for Germany's economic growth in 2026 to 1.2% from 0.5%, following better-than-expected export performance and a decline in the impact of energy price shocks related to the Iranian war. Although growth in the second quarter reached 0.3% and expectations point to a recession in the third quarter, the projected growth largely depends on government spending, which accounts for approximately 70% of the growth through increased expenditure on infrastructure and defense. Nevertheless, the German economy remains fragile, facing challenges such as rising energy prices, weak consumption, and government monitoring of cybersecurity threats targeting infrastructure that could potentially hinder the economic recovery.

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